India's IT Sector Faces Sluggish Growth Amid Global Challenges

India's Information Technology (IT) sector, a cornerstone of the nation's economy, is confronting a period of subdued growth amid global economic uncertainties and recent U.S. policy changes. Analysts project approximately 6% year-on-year revenue growth and a 5.5% profit increase for the September 2025 quarter, marking the eighth consecutive quarter of single-digit growth since the double-digit peak in March 2023.

Major firms such as Tata Consultancy Services (TCS), Infosys, and HCL Technologies are experiencing decelerated growth rates. TCS is expected to report a 2% annual revenue increase, a significant drop from 8% the previous year. Infosys and HCL Technologies are projected to deliver approximately 8% and 9.5% growth, respectively.

The recent announcement by the Trump administration to impose a $100,000 fee on new H-1B visa applications has added to the sector's challenges. This policy, effective from September 21, 2025, applies to new petitions filed for workers outside the U.S. The fee does not apply to renewals or extensions for individuals already in the U.S. The substantial fee increase is expected to impact the ability of American companies to hire skilled workers from outside the U.S., potentially affecting Indian IT firms that rely on H-1B visas to deploy talent to the U.S.

NASSCOM, India's premier trade body for the IT industry, has expressed concerns about the potential disruption to business continuity and the "considerable uncertainty" created by the short implementation timeline. The organization emphasized that Indian nationals employed on H-1B visas will be directly impacted, while technology companies will face disruption in ongoing client projects requiring onshore deployment.

Despite these challenges, some analysts see potential long-term investment opportunities. Axis Securities suggests that current stock valuations may present value, indicating a belief in the sector's resilience and future growth prospects.

The slowdown in India's IT sector has broader implications. As a significant employer, prolonged sluggish growth could impact job creation and wage growth within the industry. Additionally, as a major contributor to India's GDP, a sustained slowdown could have ripple effects on the broader economy. Increased costs due to U.S. policy changes may also affect the global competitiveness of Indian IT firms, potentially leading to a shift in outsourcing trends.

The Indian IT sector has faced challenges before, such as during the 2008 global financial crisis. However, the current combination of global demand slowdown, policy changes in key markets like the U.S., and economic uncertainties presents a unique set of challenges. The sector's ability to adapt and innovate will be crucial in navigating this complex landscape.